RealPage software raises San Diego-area rents, report finds
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Renters in the U.S. spent an extra $3.8 billion last year because of pricing algorithms used by landlords, according to an analysis from the White House Council of Economic Advisers (CEA) first shared with Axios.
Why it matters: The report puts some hard numbers to accusations that have piled up against RealPage, a company that makes software that helps big landlords and property managers set prices, Axios' Emily Peck reports.
- In August, the Department of Justice filed an antitrust suit against the company, alleging its pricing algorithm allows landlords to collectively push rents higher.
By the numbers: In San Diego County, 22% of landlords of multifamily buildings use RealPage — and renters in those buildings paid an additional $99, on average, per month, per the CEA's analysis.
- Affected renters in six metros paid more monthly (all above $100 on average), with Atlanta leading at an extra $181.
Driving the news: Researchers modeled the price difference between two scenarios using a range of publicly available data.
- In one scenario, landlords used RealPage software to set prices. In another, they set prices individually.
- Nationally, they found that those living in algorithm-utilizing buildings spent an average of $70 more per month. That number goes up in metro areas where RealPage use is more common.
State of play: California is part of the federal lawsuit accusing the company of artificially inflating rent prices, as lawmakers across the state are working to prevent local landlords from using AI-driven price-fixing software.
- In September, San Francisco became the first city in America to ban the use of algorithmic tools to set rents or manage occupancy of residential units.
- San Diego City Council is currently considering a similar ban to limit use of this technology in the local housing market.
Context: Renters make up about half of households in San Diego County, the fourth highest percentage in the country. The only metros with higher shares are San Jose (52%), Los Angeles and Orange County (51%) and New York (49%).
- Plus, about 30% of renters in San Diego County spend more than half their income on housing.
Reality check: Even if these algorithms were pushing up rents, as the CEA suggests, they wouldn't be the driving force behind rising housing prices.
- Instead, a long-term shortage of affordable housing is the main culprit, as the government's analysis notes.
The other side: "We are disappointed The White House CEA never contacted RealPage about their report, which is riddled with flawed assumptions," company spokeswoman Jennifer Bowcock said in a detailed statement Wednesday.
- "Their conclusions are based on the erroneous assumption that all property managers are setting coordinated rents, but that is not how RealPage's revenue management software (RMS) works."
- Earlier this month, the company filed a motion seeking to dismiss the DOJs claims in the antitrust suit, arguing that the agency hasn't shown any real anticompetitive effects of its product.
What we're watching: The analysis looks like the White House's last push to draw attention to the issue, but it's unclear whether the incoming Trump administration will pursue the suit.
Editor's Note: This story has been updated with a detailed response from RealPage.